HP 2012 Annual Report Download - page 141
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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 14: Taxes on Earnings (Continued)
The jurisdictions with favorable tax rates that have the most significant effective tax rate impact in
the periods presented include Singapore, the Netherlands, China, Ireland and Puerto Rico. HP plans to
reinvest some of the earnings of these jurisdictions indefinitely outside the United States, and therefore
has not provided U.S. taxes on those indefinitely reinvested earnings.
In fiscal 2012, HP recorded a $1.3 billion income tax charge to record valuation allowances on
certain U.S. deferred tax assets related to the enterprise services business, as noted above. In addition,
HP recorded charges of $297 million for various foreign valuation allowances, as well as $26 million of
income tax benefits related to adjustments to prior year foreign income tax accruals, settlement of tax
audit matters, and miscellaneous other items.
In fiscal 2011, HP recorded $325 million of net income tax charges related to items unique to the
year. These amounts included $468 million of tax charges for increases to foreign and state valuation
allowances, offset by $78 million of income tax benefits for adjustments to prior year foreign income
tax accruals, $63 million of income tax benefits for uncertain tax position reserve adjustments and
settlement of tax audit matters, and $2 million of tax benefits associated with miscellaneous prior
period items.
In fiscal 2010, HP recorded $26 million of net income tax benefits related to items unique to the
year. These amounts included adjustments to prior year foreign income tax accruals and credits,
settlement of tax audit matters, valuation allowance adjustments and other miscellaneous items.
As a result of certain employment actions and capital investments HP has undertaken, income
from manufacturing and services in certain countries is subject to reduced tax rates, and in some cases
is wholly exempt from taxes, through 2024. The gross income tax benefits attributable to these actions
and investments were estimated to be $900 million (approximately $0.46 basic earnings per share) in
fiscal year 2012, $1.3 billion (approximately $0.62 basic earnings per share) in fiscal year 2011 and
$966 million (approximately $0.41 basic earnings per share) in fiscal year 2010. The gross income tax
benefits were offset partially by accruals of U.S. income taxes on undistributed earnings, among other
factors.
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